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family residence that petitioner remodeled and converted into
office space.5 In January 1996, petitioner sold the property for
$212,500.
Respondent added $1,671 for acquisition costs and $41,743,
the cost of capital improvements,6 to petitioner’s cost basis in
the Market Street property. In computing the amount realized on
the sale, respondent subtracted $4,373 from the sale price to
account for selling costs. Using an adjusted sale price of
$208,127 and an adjusted basis of $186,914, respondent concluded
that petitioner must recognize gain of $21,213 on the sale of the
Market Street property.
Respondent did not include any of the following expenses,
which petitioner claims should increase the Market Street
property’s adjusted basis, in computing petitioner’s gain:
5Petitioner testified that he used the office space to
conduct his business of importing shoes and leather goods and
that he never resided at the Market Street property.
6Petitioner originally claimed in his petition an amount of
$62,500 for capital improvements, but he maintained in his trial
memorandum and at trial that he incurred expenses of $47,500 to
improve the Market Street property. We assume, therefore, that
petitioner has waived any argument regarding the difference
between the two figures.
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